Learning financial education is healthy for teens

Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009.
REUTERS/Rick Wilking

Financial literacy, as defined by Investopedia , is making wise and intelligent decisions on money matters gained through life-long skills and knowledge developed through time. Among teens, this does not equate to knowledge of the rules of accounting by heart or memorising credit management per se. It simply means knowing the importance of making wise financial decisions by realising the benefits of when, why and how to spend hard-earned money.

However, the education system in the United States does not give emphasis to the importance of being financially literate among teens today. In fact, only less than half of the states make financial literacy a prerequisite among grades K-12, according to the same Investopedia report.

Financial state of affairs

Nan Morrison, president and CEO of the Council for Economic Education, expressed disappointment over the number of states mandating personal finance in their courses. A survey released by CNBC revealed that fewer states require economics classes among high school students than in the past two years. Nine out of 25 states removed the standardised testing of economic concepts since 1998. Furthermore, each state has its own definition of financial education, some requiring it to be taken as early as primary school. Other states only incorporate it into their high school curriculum standards.

The importance of being financially literate among teens is crucial, as it leads to higher chances of being financially responsible adults. Financial Industry Regulatory Authority's Investor Education Foundation (FinRA) , a foundation which aims to spread financial literacy, says that states with teens who study financial education develop into more financially savvy graduates. These teens grow up to have generally higher credit scores and lower debt delinquency as they grow up.

Tenets taught at home

More than having to learn finance in school, basic money matters should be taught at home. Parents or guardians should be the primary educators of children regarding money management.

2015 Teens and Personal Finance Survey revealed that 84 percent of teens expect their parents to teach them about finance. Unfortunately, about 34 percent of these kids’ parents remain conservative and opt not to discuss money issues with them.

Teaching teens about savings, investments, and money spending can throw parents off, which is why a CNN Money article showed the different fun, engaging and creative ways of imparting finance knowledge. One of these is through mobile apps.

According to Nancy Phillips, author and financial blogger of Zela Wela Kids, apps play an important role in opening up interactive and easy ways to bring in financial literacy in the house. Traditionally, parents teach teens regarding money through the age-old piggy bank, but with today’s technological revolution, the piggy bank can very well be done online. The PiggyBot from Common Sense Media, for instance, creates a visual presentation of money kids can save.

Another company has integrated a familiar field in teaching financial literacy: music. Flocabulary uses this hip hop music to teach teens, mostly around the sixth to the twelfth grade, about personal finance. CEO Alex Rappaport said that music is so powerful that it makes learning fun. Flocabulary uses online videos to get teens interested in basic money concepts and it even incorporates quizzes into the video.

Fairy tales and fantasy stories are also helpful in teaching life lessons via memorable characters and plots. An example is Manage your Damn Money , a comedic web video series that promotes financial literacy through fun stories and screenplay.

Teens can also know about money matters by reading up on business and financial news as much as they can. The Born2Invest app, which provides 80-word summaries of curated business and financial news, is a perfect resource for teens, who can have short attention spans.

Another fun and engaging mobile app is Renegade Buggies , a shopping game that teens can easily associate with. The challenge of the game is to have as much money saved and eventually earn “bucks” that they can use to invest or save.

In this age of technology and internet, parents should not be worried about where and how to get financial information. The internet today is a very powerful medium of learning where a plethora of fun music videos and songs, reading materials and even financial literacy apps exist.